Uber share price: RBC kicks off coverage with ‘outperform’

on Jun 4, 2019
Updated: Mar 11, 2020
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Royal Bank of Canada has kicked off coverage of Uber Technologies (NYSE:UBER) with an ‘outperform’ rating, arguing that while the company’s losses were currently very sizeable, the business model suggested some potential for profitability going forward, Proactive Investors reports. The comments came after the company recently unveiled that it made more than a $1-billion loss in the first three months of the year.

Uber’s share price has climbed higher in early morning trade in New York this Tuesday, having gained 2.23 percent to $42.17 as of 09:36 EDT. The shares, however, are still changing hands below the Uber IPO price of $45.

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RBC sees Uber as ‘outperform’

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RBC initiated coverage of Uber today, with an ‘outperform’ rating and a price target of $62.00. Proactive Investors quoted the broker as commenting that ride-hailing service is having its profit potential underappreciated by the market. The analysts reckon that the company could achieve profitability through its long-term pricing power, a reduction in driver and rider incentives as competition reduces, and using scale to leverage insurance costs and reduce other operating expenses.

“Uber’s current losses are clearly very sizeable, and we expect the company’s losses to remain very high (EBITDA losses of $3 billion+) for the next two years before beginning to improve in 2021,” RBC said, as quoted by Proactive Investors, adding that while it was “rare to see companies go public with losses of this magnitude, we believe there is some evidence of leverage in the model supporting a potential path to profitability”.

The analysts also see ‘significant option value’ for the company in new businesses such as freight.

Other analysts on company

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Morgan Stanley initiated coverage of the company with an ‘overweight’ rating, with a target of $56.00 on the Uber share price. According to MarketBeat, the blue-chip group currently has a consensus ‘buy’ rating and an average valuation of $54.0737p.

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